Capital as a Factor of Production and Growth of Commercial Real Estates in Machakos County, Kenya

Abstract

Purpose of the study: The purpose of this study was to examine the influence of capital as a factor of production on the growth of commercial real estate in Machakos County, Kenya. In Kenya, real estate recorded a growth of 5.8% in September 2018 which was the slowest registered since 2014. Population growth rate is faster than the provision of new housing and housing infrastructure. Real estate provisions have diminished besides the government of Kenya’s commitment to provide affordable housing for the period between 2018 and 2022. Statement of the Problem: In 2018 the real estate sector in Kenya recorded its slowest annual growth in four years, giving weight to property market reports that signaled a slump in demand despite increased supply of new housing units. Research Methodology: The study adopted a cross-sectional survey research design. The target population for this study was made up of 374 registered property developers with Kenya Property Developers Association operating in Machakos County.The study used census approach to study all the 374 registered property developers. Prior to commencement of the actual study, 40 respondents from Kajiado, a neighboring county to Machakos were used in a pilot study to pre test the research instrument. The researcher triangulated both structured questionnaires and open ended interview guide to gather and saturate data from the respondents. While the interview guides were bent to gather in-depth qualitative data from the real estate agents, the structured questionnaire was used to collect quantitative data from the respondents who develop the real estates. Both quantitative/ numerical data and qualitative/ descriptive data were collected using structured questionnaire and unstructured interview guide respectively. Qualitative data was analyzed using descriptive statistics while quantitative data was analyzed using inferential statistics. Statistical Packages for Social Sciences (SPSS) software was used for higher statistical computations. Results: The findings revealed that there was; a positive and significant relationship between capital as a factor of production and growth of commercial real estate in Machakos County, Kenya (β =0.275, p=0.000). Conclusion: Based on the findings the study concluded that investments for most commercial real estates in Machakos County, Kenya come from personal savings and equity loans from banks; interest rates have a profound effect on the value of income-producing real estate in Machakos County, Kenya just like they do on any other investment. Recommendation: The study therefore recommended that commercial real estate developers in Machakos County needed to mobilize large amounts of private capital from either primary or secondary market in order to start tackling its unmet housing demand. Growing the size and reach of the mortgage market is part of the solution for the upper and middle income urban segments of the population. Mortgages alone cannot be the only hope to satisfy the entire housing demand. Solutions were also required for lower income groups in the form of housing microfinance, rental frameworks and financing for self-construction, especially on an incremental basis.